Can we imagine a world where a private actor would have acquired sufficient power

The situation is very different from country to country. Some countries, despite crises, have currencies considered stable; in others they are unstable. In countries where the currency is unstable, the loss of citizen confidence can lead to a switch to private digital currencies. What’s more, the opportunity to become a bitcoin millionaire is always wide open.

Today what is seen as a real threat to central bank currencies are private stablecoins. These are currencies issued by private organizations or linked to companies that provide trust (for example Facebook and the Diem project) or that technologically reproduce the stability of other currencies by indexing their assets to a basket of major stable currencies. of the world. Under these circumstances, it is possible to imagine a currency of large companies that could compete with a public currency. This is a major risk for States. It should be noted that it is completely different from bitcoin.

If users can pay online with the currency linked to Facebook, the scale will be totally different from that of bitcoin, especially if these currencies show up as stable. 

What about the anonymity, security and universality of these private stablecoins? Let’s take universality for example. not everyone because the State will be able to guarantee universality. But this would risk creating a situation where, if a private currency is imposed, universality would be broken in fact in certain sectors. There is therefore a real danger of monopolization of the monetary sector by private actors.

The other issue is that of stability. If the big digital companies can be more stable than certain States, the States cannot delegate to these companies the capacity to save the financial system if it collapses. For example, in a society where most people would use a private currency, and one day for X or Y reasons, many actors lost confidence in this currency. What would happen then for individuals whose savings would be mainly in this currency? In our current system, the state is the guarantor. Should we then imagine that it is the States which – to save this private currency and therefore the savings of citizens – would ultimately guarantee the convertibility of a private currency into their currency? I think this is precisely the situation to avoid.

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Do digital currencies sound the death knell for monetary and financial institutions?

Digital is changing and will change the monetary institution in the broad sense. On the other hand, making it disappear, absolutely not. Nevertheless, it is necessary to answer the formal questions that arise: how can digital currencies replace physical currencies? How will regulation and policies have to adapt? How can States react to this new type of dematerialization? What is interesting is that the notion of money does not disappear.

Looking at the history of money, it is clear that many currencies have been used, as well as many monetary institutions have existed with different forms, in different places. This is still the case today. Admittedly, we frequently use a single standard, but there are several forms of currencies. This plurality is to be accepted in order to have serene debates.

What matters now is to define who is the last resort of the system. Is it always the States that must ultimately guarantee convertibility between currencies? It is important to say where the limit is and it is a reflection that must take place ex ante and not ex post. 

The big challenge for central banks today will be to successfully launch – and therefore accept – a central bank digital currency. If currencies are created for people with few bank accounts, won’t the majority of users continue to use their credit card? In this situation, individual economic actors would mainly use solutions intermediated by banks, but there would be this function of last resort, universal offered by the central bank to buy its bread. The worst would be the creation of a central bank currency that no actor would use. Surely not all central bank digital currency has to eclipse banks, but it has to be used enough to be credible.

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